GOP Politicians Want Corporate Tax Cuts -- But Most Other People Don't

Corporate tax cuts are in the air. Pretty much every elected Republican is determined to slash the tax rate on corporate income, and even some Democratic politicians like the idea.

But you know who doesn’t? Almost everyone else.

There’s a lot of loose talk in Washington about the “consensus” supporting corporate tax reform. “Even in an era of bitter partisanship,” observed Walter Frick recently in theHarvard Business Review, “there’s consensus that the U.S. corporate tax code has a lot of problems.” Chief among its widely acknowledged pathologies: a 35% rate that puts it at or near the top inglobal rankings.

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The consensus for corporate rate reduction may be real – but only if we confine our polling to the two ends of Pennsylvania Avenue.

If we venture further afield, we find a different sort of consensus. Americans are definitely unhappy with the state of the corporate tax system. But rather than cutting rates, they want toraisethem.

Higher Rates

In arecent surveyby the Pew Research Center, 24% of Americans said tax rates on corporations should come down. But more than twice as many, 52%, said rates should actually go up. Another 21% wanted to leave rates where they are.

The Pew survey should be sobering news for Republicans, especially since it’s broadly consistent with similar surveys over the past year.

Shortly after President Trump released his first tax plan in April,Quinnipiacfound that 39% thought reducing the corporate rate to 15% was a “good idea,” while 55% thought it was a “bad idea.” Not exactly a ringing endorsement.

And it gets worse. An AprilGallup pollfound that 67% believed corporations were paying “too little.” A similar question in the same month from thePew Research Centerfound that 62% were bothered “a lot” by the feeling that corporations were avoiding “their fair share” of the nation’s overall tax burden. Another 18% were bothered “some.”

So 80% of Americans are concerned about corporations and the taxes they don’t pay. Not exactly fertile ground for selling a business tax cut.

Still, some polls offer a glimmer of hope to fans of a business tax cut.

When rate reductions are framed in terms of job creation, support tends to rise significantly. AQuinnipiac poll in Julyfound an almost even split between those who thought a business cut would deliver real benefits (48%) and those who didn’t (47%) — better, if not exactly great, numbers for fans of slashing the corporate rate.

When cast in terms closer to home, support tends to rise even more. In April, aKaiser/Washington Post pollasked rural voters whether lowering business taxes was important to “the job situation in your local area”; 46% said “very important” and 32% “somewhat important.”

Perhaps most promising, support for cutting taxes on small businesses tends to outpace support for cutting corporate rates (perhaps because small businesses tend to be “in your local area,” at least notionally). In September, aPolitico/Morning Consult poll found that 66% of respondents supported a special 15% rate for small businesses, compared with 34% who endorsed a reduction in corporate rates.

It seems plausible, if not exactly likely, that legislators may be able to leverage sympathy for small business to help advance broader business tax reform that includes those unpopular corporations.

History Agrees

Generally speaking, recent polls are consistent with similar surveys from the past 70 years or so. In general, Americans have been longtime fans of taxing corporations and reluctant supporters of corporate tax cuts. But they have also been (modestly) more supportive of business tax cuts when they’ve been framed in terms of job creation.

The popularity of corporate taxes is easy to understand and amply borne out by the poll data. In 1954 economist Gerhard Colm captured the political dynamicsuccinctly. The corporate tax is “almost ideal” from a political perspective, he said. “There is no other tax which brings in so much money while making so few voters mad.”

Still, voters have also been open to the idea of using business tax cuts as a form of economic stimulus. We tend to remember the 1930s as a period of unrelenting popular hostility toward big business. And yet, an April 1938 poll by Gallup found that 71% endorsed business tax cuts when used to encourage prosperity (while just 29% supported higher government spending for relief and public works).

In later decades, Americans tended to support — occasionally and somewhat tepidly — various proposals for corporate tax relief. As I wrote in a 2012 article for theKansas Journal of Law & Public Policythat surveyed poll data on corporate taxes, “support for business tax cuts as a form of economic stimulus remained reasonably popular throughout the postwar era.”

But support was never especially deep, and it tended to fade when juxtaposed with arguments about corporate tax avoidance.

In September 1974, 64% “fully” or “partially” agreed that lawmakers should establish “special tax incentives to business to help build up the economy” while only 28% disagreed. However, the public seemed to distinguish between “incentives” and “breaks” or “loopholes”; question wording appears to have played a key role in shaping poll results. In November 1970, just 18% supported proposals to give business a “better tax break,” while 57% opposed the idea. In August 1976, a CBS News/New York Times poll offered a choice: would respondents prefer tax cuts for investors and large corporations to encourage growth, or would they rather see a crackdown on “tax loopholes” used by these groups? Fully 71% supported the crackdown, and just 15% the growth.

Other poll results from the postwar decades are broadly similar (although we should be careful not to exaggerate the depth of polling on corporate taxation; personal income taxes get a lot more play from pollsters). Taken as a whole, these old polls, combined with current surveys about small business, offer some glimmer of hope for the tax reform champions of 2017

But the glimmer is faint. The real message from 70 years of poll data is not exactly encouraging. Americans, it turns out, are not especially sympathetic when it comes to the plight of the overtaxed corporation. In fact, they are generally inclined to soak ‘em.